Buy-It In Israel

Points to consider when negotiating a rental contract

Posted on 29. Jun, 2010 by buyitinisrael in Legal Matters

By Elana Billig, Advocate and Notary

© Tal Cohen

Rental periods for homes in Israel commonly begin and end between the months of June and September.  Many people seem to prefer to move during the summer months, and this is particularly true for families  wanting to ensure that their children start and end the school year in the same place, and therefore plan their move around the academic year.

Negotiating a rental contract can be stressful for both the landlord and prospective tenant.  The negotiations may be further exasperated when a family is endeavoring to rent a home in Israel from abroad.  An additional challenge is that a super-majority of rental agreements are presented to the prospective tenant in Hebrew, and in many situations the landlord’s English skills are severely limited as is the Hebrew of the prospective tenant.  Add that to the technical differences between what is standard in rentals in Israel and your home country, and the cultural differences, and rightfully so, many parties find themselves extremely challenged.  A seasoned Israel real estate attorney will be able to assist you achieve a maximal result.

The following shall serve as a guide to some of the key points which need to be carefully considered as part of the negotiation of the rental agreement from both sides.

1. Identification of the Property – The rental premises should be carefully identified, and the prospective tenant should perform a title search to ensure the landlord is the current and rightful owner.
2. Term – The term refers to the rental period and the contract must clearly state the date that the rental term will commence and terminate.
3. Option – The parties should decide in advance of signing the lease if there will be a renewal option and both parties should very clearly understand what conditions must be met in order for the lease to be renewed and what notice periods are needed to renew such.
4. Price – The monthly price of the rental should be explicitly stated. If there are any escalations forecasted at any time in the rental period or in any option period, the lease is the place to set forth the adjusted rent and at what point any change in the rental rate would begin.
5. Method of payment and frequency – The parties must agree as to the frequency of payment i.e. monthly, quarterly, annually, etc., whether the payment will be made by post dated checks, collected monthly by the landlord or by wire transfer or by some other scenario.
6. Currency – It is imperative for the lease to be clear as to the currency. If the lease sets forth any floors for an exchange rate, the tenant must understand this and ensure they will be able to cover the rent even if there are large fluctuations in the currency.
7. Additional Costs – The parties should agree in advance as to who will be responsible for costs in addition to the rental fee.  Additional costs vary, and may include municipal taxes (arnona) and in some municipalities there are fees for security, sewage, etc., house committee fees (vaad bayit) and building management fees, utilities, and even gardening amongst others.
8. Contents – It is imperative to have an itemized listing of what the rental includes, i.e. appliances, air conditioning, closets, furnishings and so forth.
9. Use of Premises – If the tenant has any intention other than using the premises for residential, this must be discussed with the landlord. A tenant wishing to have a pet should request permission in advance.
10. Insurance – The parties must discuss the types of home insurance to be maintained and which party will be responsible for the premiums.
11. Customizations – If the tenant plans to make any changes to the apartment to adapt it to their needs this should be requested in advance in writing. It should also be agreed upon whether the tenant can hang pictures, light fixtures, install security bars and so forth.
12. Painting – A lot of controversy surrounds painting. It should be agreed in advance if the landlord will tender the apartment freshly painted and also whether the tenant is required to return the apartment as received or freshly painted.
13. Repairs – Handling of repairs is one of the most complex issues to address in a rental contract particular due to the difficulty in differentiating between wear and tear and breakage in many instances.  Also you will probably not know in advance whether your landlord is “hands on” or “hands off”.  When an apartment is new and covered under the warranty period of the builder (kablan), the subject of repairs can be further complicated.  The contract is the place to set forth in black and white who is responsible for repairs, who the repairs are to be coordinated with, the time frame in which the landlord must handle a repair, the process for paying repair personnel, and the method and timing for any reimbursement to the tenant.
14. Security - There are many different types of security which the landlord may request.  Examples include: bank guarantees  (arvut  banka’it), security check (check bitachon),  promissory notes (shtar chov), utility checks, money held in escrow, among others.   There is also a very large range in the amount of security which is tendered, and factors such as the condition of the unit, the location and so forth may influence the amount of security the landlord will require.  When the security is agreed upon, the contract should be written in such a way that it is clear what situations would allow the landlord to use all or a portion of the security. It is also important that the contract explicitly state the time frame for the landlord to return the securities.
15. Guarantors – Some landlords will require guarantors.  A guarantor should be someone who is an Israeli citizen with active income in Israel.  The guarantor will in many instances have to present recent salary stubs among other personal information and obligations.   In many situations new immigrants discover that they do not have someone to act as a guarantor and often a landlord can be placated by receiving a larger security deposit than initially requested.
16. Breach – The contract should delineate what is considered a breach of contract and what happens in such a situation, particularly in the situation of a fundamental breach.  The contract should set forth a provision as to what happens if the tenant does not vacate on time. Such a section protects the landlord as he/she is compensated for a late departure and protects the tenant, as sometimes a few extra days are needed on a lease for situation beyond the tenant’s control. The contract should also state the penalty for late payment and whether there is any grace period.

There are many other issues which are addressed in a thorough rental agreement, and I am confident the above will provide you with more than the basic ammunition you need to commence the negotiations on your home in Israel.

The contents of this article are designed to provide the reader with general information and not to serve as legal advice or other professional advice for a particular transaction.  Readers are advised to obtain advice from qualified professionals prior to entering into any transaction.

Elana H. Billig, Adv. is an Associate at Gideon Koren & Co., Law Offices and Notary, and is also a licensed Israeli Notary. Should you have any questions or comments regarding this article, feel free to contact Adv. Billig by email at elana@gkl.co.il.

©  Copyright 2010.

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